The Art of Stock Screening

By Jake Strong

Stock screening is one of the methods many stock investors and traders use to find ideal stocks. However, it's also something that's a bit misunderstood. Many seem to think stock screening is a science, but it's an art form. There's no exact formula that's a winner every time.
The purpose of screen stocks is to find stocks that match your required attributes for investment or trading,
Depending on your screen parameters, it's possible to come up with 1,000 stocks or none at all. Ideally, you want your stock screen to reveal 15-20 stocks for you to look at. That's just my own number. Some stock traders and investors want lists of 30-50.
If you're new to stock screening, you can find screening software (or Web site) that offers pre-made screens. These are okay for learning, but you'll want to learn the ropes and come up with your own criteria. We all value things differently.
While I'm sure you'll develop your own screening criteria, here are a few general attributes that I like my stocks to have:
1. The company must have a positive operating cash flow.
2. The company must have at least $X million in sales-I raise this up when I'm looking for larger companies.
3. Total debt/equity ratio under X.
The debt/equity ratio depends on the industry. It could be under .5 or under 2. For instance, if I were looking at the auto industry, the acceptable ratio would be higher than if I were looking for computer companies.
If you want to know more about stock screening, there's plenty of information out there-including a link below. There's no right or wrong criteria mix for stock screening. It's an art form and you should come up with your own mix.
Looking for stock tips, stock news and stock advice? Check out FinancialRebel.com. There's plenty of financial information there--from stock trading to personal finance.
In FinancialRebel.com's training section, there's a great article you might enjoy: "How to Buy Stocks Online." It's worth checking out if you want to learn how to buy stocks online.
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